Debate centres on new policies for older employees

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The central Dutch employers' organisations and trade unions, represented on the Labour Foundation, will soon publish recommendations to promote the participation of older employees in the labour market. In addition, the Dutch Government has reached an agreement on a bill that prohibits companies from discriminating according to age in recruitment and selection procedures. Both developments should be viewed against the background of the aim of the Government and the social partners to check the flow of older employees from the labour force.

In the Netherlands, the proportion of older people who are employed is much lower than in other industrialised countries. Labour market participation of people aged 55 and over is about 25%. At the moment, their number is roughly equal to that of young people in the general population. By 2010, however, the number of older people will be twice that of their younger counterparts. If current policy is not changed, this development will result in a sharp decrease in financial support for collective provisions (eg social security) in the face of rising demand. By promoting labour market participation, the Dutch Government aims to maintain the level of financing for the current system of collective provisions.

The relatively low participation rate of older people has been caused in part by cyclical problems in the 1970s and 1980s when many Dutch companies were forced to merge or reorganise. In order to prevent massive youth unemployment at that time, companies introduced early retirement (VUT) schemes to have employees retire before reaching the previously required age. Furthermore, the "Directive for the elderly" (Ouderenrichtlijn), issued in 1982 by the Minister of Social Affairs and Employment, provided companies with a legal basis to introduce appropriate policies where a disproportionately high number of older employees were involved in collective redundancies. This Directive was subsequently withdrawn in 1994.

While the Dutch economy is currently prospering, older employees are not sharing in its success and form the only group where unemployment is not decreasing. In fact, long-term unemployment is actually increasing in this segment of the labour force. Only a quarter of those unemployed people aged 55 and over succeed in finding a new job. Recently, OECD research has shown that three quarters of Dutch employees aged 45 and over are not certain about their job security (, Organisation for Economic Co-operation and Development, Paris (1997)).

Responses to the problem

Both the social partners, as represented on the Labour Foundation (Stichting van de Arbeid or STAR), and the Government are striving to promote the participation of older employees on the labour market and, in this way, check the flow of this group out of the labour force.

STAR will soon publish its policy recommendations to promote the participation of older people in the labour force. The recommendations will focus on improving workers' employability and preventing age discrimination. One of the most important conditions for remaining employable concerns company training and education. In order to enable older employees to stay active within a company, the employer should offer sufficient training opportunities which, in turn, must also be taken up by the employee. This will require most companies to change their policy on training. Various studies have shown that participation in training programmes of employees of 45 years and older lags far behind that of younger workers. As a result, the skills and knowledge of older employees often do not sufficiently reflect recent developments in their professional area. Hence, their productivity decreases as their wage costs rise, and employers become tempted to recruit younger employees. Consequently, improving the employability of older workers should check this development.

Employers and employees within the Labour Foundation have stated that age limits, unless strictly required by the nature of the work, should not be included in job advertisements. This corresponds to the provisions of a bill, agreed in July 1997, that forbids age discrimination in recruitment and selection procedures. The bill is currently being reviewed by the Council of State (Raad van Staat), the highest advisory body to the Government, before being submitted to the Dutch Parliament. Initially, the Foundation was divided over the bill. The trade union representatives did not agree with the employers' representatives who maintained that high wage costs constituted objective grounds for not hiring older employees. The Foundation's initial recommendations on a policy for older employees mentioned the possibility of offering these workers a lower wage or function. This strategy, called "demotion", was intended to encourage employers to choose older candidates when recruiting people from inside or outside the company. After it became known that the social partners were close to reaching an agreement on this part of the recommendation, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging,FNV ) was confronted by a series of resignations by its members. Subsequently, the FNV publicly opposed this "demotion clause". Consequently, the final text of the Labour Foundation's recommendations states that a downward adjustment of wages or functions is not open to discussion.

Commentary

The "demotion" issue is not mentioned in the final version of the Labour Foundation's recommendations. Employers may therefore no longer exclude older employees from policies to improve labour market participation on the grounds of wage costs. However, this concerns only older people who have already been employed. When recruiting and selecting new personnel, employers still believe that they should be able to opt for candidates who combine low wage costs with high productivity.

Studies on the relationship between age and productivity have so far proved inconclusive ("Beloning en produktiviteit" ("Pay and productivity"), A Gelderblom, N 't Hoen and J de Koning, Netherlands Economic Institute, The Hague (1994) and "Ageing of the working population and employment", A Goldberg, Working Paper, European Foundation for the Improvement of Living and Working Conditions, Dublin (1991)). The argument made by employers that older workers produce less and cost more seems to be part of a vicious circle. Indeed, if it can be concluded that productivity decreases with age, then employers themselves are partially to blame. Because older employees are often not provided with adequate training and education within the company, they are often accused of being less productive than younger personnel, and subsequently become less competitive as a group on the labour market. The agreement between the employers' organisations and trade unions on the improvement of workers' employability and the pursuit of life-long learning seems to have come too late for the remaining three-quarters of all those unemployed people aged 55 years and over who never succeed in finding a job again.

The agreements which have been reached by the Labour Foundation regarding age limits seem to leave some room for the employers to manoeuvre. At present, it is hard to foresee whether companies will apply age limits at a later stage of the recruitment and selection process. In order to promote labour market participation of older people unambiguously, a law must be drafted to prohibit age discrimination across the entire recruitment and selection process. (Martijn van Velzen, IHS)

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